Financial issues don’t go away, even in the holiday season. LITRG urge you to spare a few minutes to read this month’s summary of topical tax and tax credits matters.
Introduction
As part of LITRG’s monthly series of reminder articles, topical tax and tax credits issues are covered under these headings:
- Tax return or tax payment troubles?
- Tax credits
- Students
Where advised to contact HMRC, if you telephone them, keep a careful note of your conversation, as outlined in LITRG’s earlier article.
1. Tax return or tax payment troubles?
LITRG’s July article outlined why July is a key month in the self assessment calendar. Missed deadlines can mean penalties; but all might not be lost – you might be able to appeal to HMRC (and, if necessary, to an independent tribunal).
Appealing against a penalty for a late 2009/10 tax return
If you still haven’t sent in your tax return for 2009/10, you are likely to get a second fixed £100 penalty from HMRC this month. If you think that the penalty notice was issued in error (for example, you did file the return by 31 July so you think should not be due to pay a second penalty), make sure you lodge an appeal within 30 days of the notice.
Even if you did not meet the deadline, you may have a reasonable excuse for late filing, which means you can appeal against the penalty.
Late tax return penalties where you owed less than £100 at 31 January 2011
Under the rules which applied to tax returns for 2009/10 and earlier, the £100 fixed penalty should also be reduced to nil if you had paid all the tax due for 2009/10 by 31 January 2011 or had no tax to pay. If you owed less than £100 at that date, the penalty is limited to the amount you owed (eg if you owed £50, the maximum penalty is £50).
Note that this rule has changed for 2010/11 tax returns onwards, so the £100 late filing penalty is now fixed and not ‘capped’ in the way described above for earlier years.
Missed the 30-day appeal deadline?
Late appeals against penalties may be accepted if you have a reasonable excuse for not meeting the 30-day deadline (and the independent tribunal might still consider a late appeal even if HMRC refuse to accept it).
Late payment penalties – 5% surcharges
If you still owed tax for 2009/10 as at 31 July 2011, you could also be charged a second 5% surcharge for late payment – so for every £100 you owed at that date, you will be charged an extra £5 on top. Again, the notice of the penalty is likely to come through some time soon. Similar rights of appeal apply as for late filing penalties and again, you must lodge your appeal within 30 days of the date on the notice.
Second payment on account 2010/11
If you are in self assessment and are due to make payments on account, the second of these for 2010/11 should have been paid by 31 July. If your circumstances have changed, you might want to consider whether you can claim to reduce 2010/11 payments on account.
You can still claim to reduce your payments even if you have already paid the 31 July instalment, and ask HMRC to refund the amount you believe you have overpaid. But you must genuinely think you will owe less overall for the 2010/11 tax year than for 2009/10 (on which the payments are based).
If your self assessment statement was delayed, which meant you had difficulty making your 31 July payment on time, HMRC have said they will not charge you interest provided you pay within 30 days of receiving the statement.
Having difficulty paying?
Contact HMRC as early as possible to discuss your situation if you are having trouble paying your tax. They might agree to let you have more time to pay, although you will still be charged interest on any amount not paid by the due date. The TaxAid website gives more information on negotiating time to pay (see useful links below).
2. Tax credits
In April, LITRG explained the tax credit renewals process and changes to the system from 6 April 2011 (see article in useful links below). If you do not yet have final details for last year, you can give an estimate so long as you either confirm the estimate, or file accurate figures, by 31 January 2012.
Renewals - missed the 31 July deadline?
If you have now missed the 31 July deadline, you are likely to receive from HMRC a ‘statement of account’ telling you that they have stopped your payments. In addition, HMRC are likely to ask for all of the tax credits paid since the start of the tax year in April to be repaid to them. If you contact HMRC within 30 days of receiving this document, HMRC will process the renewal and reinstate your 2011/12 claim back to April. Last year, HMRC extended this 30-day grace period to 60 days due to the problems some people had getting through to the helpline to renew. It is not clear whether a similar extension will be given this year, therefore it is best to respond to the statement of account within 30 days to ensure your claim is reinstated.
If you miss that further grace period, you can only renew and secure your entitlement for the whole of 2011/12, if you:
- have ‘good cause’ for your failure to renew so far, and
- complete your renewal by 31 January 2012.
If good cause doesn’t apply, HMRC will ask you to repay all payments made to you from the start of the tax year, and you will need to make a new claim for tax credits which can only be backdated 93 days.
If you have missed the deadline, contact HMRC as soon as possible. Telephone the Tax Credits helpline on 0845 300 3900 (Textphone 0845 300 3909).
Did you fail to complete your tax credit renewal because you no longer wish to claim?
Once in the tax credit system, it is notoriously difficult to get out again without incurring an overpayment. However, HMRC have now introduced rules that allow claimants to leave the system if they choose to do so.
Some people decide that they no longer wish to claim tax credits, and often don’t complete their ‘renewal’ forms as they don’t wish to claim any further tax credits. But this is the wrong way to leave the system, as any payments of tax credits made since April become overpaid and have to be repaid to HMRC.
However, you may be able to withdraw at a different time which will mean no overpayment will occur. LITRG urge anyone who wishes to withdraw from the system to seek advice (for example from an advice agency such as Citizens Advice or local authority welfare rights).
School's out - check your tax credits
The school year has just ended and, unfortunately for parents, the holidays can bring with them tax credit changes. LITRG’s recent article (see useful links) provides guidance in two key areas where your tax credits claim could be affected:
- Childcare costs in the school holidays; and
- What happens when your children leave school.
Check your situation so that you claim all you are entitled to, or avoid being paid too much and having to pay it back later.
3. Students
Leaving school, college or university?
Exam results are coming up and you may be considering what to do next. For those entering the world of work, either from school or university, times are tough. LITRG’s article ‘Leaving school, college or university?’ (see useful links) gave some tips on things to consider which could be of help, including:
- working on an employed or self-employed basis;
- making sure you are paying the right tax; and
- checking if you are entitled to tax credits.
Might you be due a tax refund?
Students’ working patterns can often lead to paying too much tax on their wages. LITRG’s article ‘2010/11 Tax repayments – check your cheque!’ (see useful links) explains when HMRC will send you an automatic refund and tells you how to claim one if they don’t.
Staying on at school?
16 to 19 year-olds considering staying on at school should check their entitlement to Education Maintenance Allowance (‘EMA’) which can pay you up a weekly sum, depending on household income. The scheme closed in England for new entrants from 1 January 2011, but check the rules in Northern Ireland, Scotland and Wales if they might apply to you.
Working in the summer holidays?
Students working only in vacations who meet certain criteria may be able to fill in a P38(S) so that their employer can pay them without deducting tax.
Coming to the UK to study?
For international students coming to study in the UK, HMRC provide a short guide to the potential tax issues (see useful links).
Useful links
LITRG guidance on appeals and reasonable excuse
LITRG guidance on self assessment payments on account
HMRC guidance if you are having difficulty paying your tax
TaxAid guidance on negotiating time to pay
LITRG’s article ‘Tax credits and the new tax year – changes and renewals’
Citizens Advice
LITRG’s article ‘School’s out – check your tax credits’
LITRG’s article ‘Leaving school, college or university?’
LITRG’s article ‘2010/11 Tax repayments – check your cheque!’
Information on Education Maintenance Allowance
Directgov information on Student finance options
LITRG guidance on the P38(S)
HMRC tax for international students guide
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